Fitch ups Starbucks, gives loan A

Fitch Ratings said it upgraded the issuer default ratings of Starbucks Corp. to A/F1 from A-/F2 and assigned an A rating to the company's new bank credit facility.

The outlook is stable.

Fitch said the upgrade reflects that Starbucks exceeded its expectations related to top line growth and margins while consistently maintaining strong credit metrics.

Moreover, the company continues to generate industry leading comparable sales and good operating cash flow growth. For the year ended Sept. 27, lease-adjusted leverage was 2 times, down from 2.2 times at the end of fiscal 2013. FCF (CFO less capex and dividends) was roughly $1.5 billion or about 8% of revenue.

The agency expects total adjusted debt-to-operating EBITDAR (defined as total debt plus 8 times gross rent-to-operating EBITDA plus gross rent) to estimate current levels in fiscal 2016 and 2017 while FCF is projected to exceed $1 billion in both years.

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